{"id":25197,"date":"2025-08-13T08:04:42","date_gmt":"2025-08-13T12:04:42","guid":{"rendered":"https:\/\/share.ca\/?p=25197"},"modified":"2025-08-13T08:08:11","modified_gmt":"2025-08-13T12:08:11","slug":"asset-managers-cant-have-it-both-ways-on-sustainability","status":"publish","type":"post","link":"https:\/\/share.ca\/blog\/asset-managers-cant-have-it-both-ways-on-sustainability\/","title":{"rendered":"Asset managers can\u2019t have it both ways on sustainability"},"content":{"rendered":"\n\n
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US-headquartered global managers \u2014 the largest in the world by assets, with a global client base \u2014 have recently been trying to show that they could cater to all sides, from asset owners that have spent years integrating sustainability into their investment strategies to\u00a0anti-ESG\u00a0elected officials in states like Texas.<\/p>\n

It\u2019s not working. Global asset managers can\u2019t have it both ways.<\/p>\n

Asset owners \u2014 a category that includes pension funds, sovereign wealth funds and foundations \u2014 are expressing concern as some managers appear to waver under political pressure. These investors have spent much of the last decade refining how they manage material risks and they\u2019re taking notice when managers compromise those principles.<\/p>\n

At a recent meeting convened by the Global Unions\u2019 Committee on Workers\u2019 Capital (CWC)<\/a>, asset owners from around the globe met with\u00a0BlackRock, and cautioned that corporate engagement should not be reduced to inconsequential exchanges of information. The asset owners made their client expectations clear: they want meaningful and effective stewardship, not fence sitting.<\/p>\n

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Asset owners around the world are getting fed up with their providers who appear more focused on placating anti-ESG politicians than protecting long-term value. The NYC Comptroller and the Netherlands\u2019 PME, have placed some managers on notice. Some asset owners have downsized (e.g., People\u2019s Partnership in the UK) and even ended (e.g., AkademikerPension in Denmark and PGGM in the Netherlands) mandates with some US global managers that were underperforming on stewardship.<\/p>\n

So BlackRock might\u2019ve recently regained favour in Texas \u2014 at least enough to be removed from the state\u2019s blacklist for the time being \u2014 but the broader question remains, will they win back Texas only to lose the rest of the world?<\/p>\n

Asset managers don\u2019t need to lose clients \u2014 they could be winning them.<\/p>\n

Analysts at JP Morgan estimate that global demand for sustainable investing represents a $7.3 trillion opportunity.<\/p>\n

But there\u2019s a precondition. Seizing this opportunity will require managers to demonstrate that their stewardship activities \u2014 dialogues with companies, voting at annual general meetings, etc \u2014 are genuinely encouraging companies to mitigate sustainability risks and achieve goals that are in line with the values of their asset owner clients.<\/p>\n

As much as some politicians and asset managers would like to pretend that climate and social risks aren\u2019t real, investors continue to be exposed to company and portfolio level risks that emanate from being on a course for temperature increases of up to 3.1 degrees, according to 2024 UN estimates, and a sharp escalation in violations of fundamental labour rights around the globe, according to the Global Rights Index.<\/p><\/blockquote>\n

Whether investors treat those matters through an impact, a financial materiality, or a systemic risk lens, a growing number of asset owners are concluding that \u201cinformation sharing\u201d conversations between investors and companies is not a good way for managers to steward their assets.<\/p>\n

While some US managers have created sustainability-focused products for specific client segments, most of their assets continue to be behind their weaker \u201cbenchmark\u201d policies. The CWC estimates that (merely) 3 per cent of BlackRock\u2019s public equity assets are captured by its sustainability guidelines \u2013 with the remaining 97 per cent of assets being subject to its benchmark policy.<\/p>\n

US managers who have adopted a twin-track approach to stewardship could thus engage with the same company using two different outlooks on sustainability risks. One type of engagement, backed by a larger asset base, can consist in \u201cinformation sharing\u201d dialogues with a company on climate risk, while the other, backed by a smaller asset base, can ask the same company to decarbonise its operations by 2050.<\/p>\n

The sustainability opportunity \u2014 as identified by JP Morgan \u2014 lies with managers who adopt well-defined, organisation-wide (entity-level) commitments to stewardship, as opposed to a product-by-product approach that caters to different client segments.<\/p>\n

Innovative asset owners have spent a decade developing comprehensive risk and opportunity analyses that help them navigate serious portfolio and systemic risks. Global asset managers aren\u2019t going to hold on to their business by weakening their stewardship even further.<\/p>\n

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This article was originally published on top1000funds.com<\/a>.<\/em><\/p>\n <\/div>\n\n <\/div>\n <\/div>\n